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Articles Posted in Tax Law

Nathan VinsonBelieve it or not, the end of 2020 is quickly approaching (insert collective sigh of relief). While I think most of us are ready to start looking forward to 2021 and would prefer to not even have to utter the words 2020 anymore, now is the time to finish off the year strong by reviewing simple, yet important, year-end tax planning and wealth transfer tips.

When most people think of tax planning and wealth transfer, they may have in mind complex estate planning documents and an overload of legal and accounting advice.  But that doesn’t have to be the case.  Here are three simple tips that you can implement with relative ease, though you will want to consult your tax advisor first.

1. The Annual Gift Tax Exclusion. The simplest tax planning and wealth transfer technique involves the all-too-familiar annual gift tax exclusion.  The annual gift tax exclusion is an amount that a person may give to another person without having to file a gift tax return or otherwise report to the IRS.  The current exclusion is $15,000 per person receiving the gift.  The exclusion is indexed for inflation, but it may only increase in $1,000 increments.  Further, married taxpayers may elect “gift-splitting,” which basically doubles the amount of the gift that they may make to one person using the gift tax exclusion; for each person receiving the gift, the limitation would be $30,000 rather than $15,000.  For example, if a married couple has two children and four grandchildren, they can give up to $30,000 to each of these people tax-free and without having to report it to the IRS.  Therefore, the married couple may transfer $180,000 total to the children and grandchildren.  Going further, if the children are also married, the taxpayers may give an additional $30,000 to each child’s spouse, which may be desirable if the child and the spouse hold a joint checking or investment account.  Note, however, that a gift tax return would need to be filed if the taxpayers elect gift-splitting.  The gifts are not taxable at all, but the IRS would like to know that the $30,000 was gifted via gift-splitting.

Well here we are.  It has been well over a year since the United States Supreme Court’s decision in South Dakota v. Wayfair, Inc.  As a refresher and not to make your eyes agonizingly glaze over with the down and dirty tax details, Wayfair essentially upheld South Dakota’s tax law that required remote retailers with no physical presence in the state to collect and remit South Dakota sales tax.  Prior to Wayfair, states could not require retailers without a physical presence in such states to collect and remit sales tax pursuant to the Supreme Court’s decision in Quill Corp v. North Dakota.

Nathan Vinson

Nathan Vinson

South Dakota’s remote retailer law sets a threshold requirement for its application.  A remote retailer must, on an annual basis, deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions for the delivery of goods or services into the state.  The law therefore contains a so-called small retailer exception.

By Leah Morrison

Leah Morrison

 Leah Morrison

English, Lucas, Priest & Owsley, LLP

2018 Kentucky legislation expanded the types of services subject to sales and use tax, established economic nexus thresholds for remote retailers, and amended certain excise taxes. In other words, 2018 brought new headaches to Kentucky businesses statewide. But one group in particular was more burdened than the rest: nonprofit organizations. New legislation forced nonprofits to pay sales tax on all the extended services, if applicable, plus, most notably, on sales of admission. This cut deeply into a nonprofit’s ability to raise funds at fundraising events.

Nonprofits had to employ some creative techniques to separate sponsorships and donations from the costs associated with being allowed entry into their fundraising events. Additionally, sales tax had to be collected and paid on certain items auctioned during these events. If the auction item in question was a physical object, tax had to be paid on it – and at the auctioned price, not the actual, retail value of the item. But auction items such as lawn care services or vacations were exempt from sales tax collection. These are only a few examples of the nightmare nonprofits were forced to navigate. Compliance with sale tax laws drained their resources and significantly impacted the ability of nonprofits statewide to provide their charitable purposes in draining the resources they had available to them.

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By Nathan Vinson, Partner

English, Lucas, Priest and Owsley, LLP

balance-business-calculator-163032-300x205Recently, a colleague asked me what I thought was a simple question about the required minimum distributions that those over 70 ½ must take each year from their retirement accounts. In the course of doing the research to answer that question, I discovered it’s not easy to determine exactly how required minimum distributions must be taken.

By Nathan Vinson
English, Lucas, Priest & Owsley, LLP

If you want to save up for your child’s future college education, 529 plans have long been a great option. Lovingly named for the section of the IRS tax code where these reside, 529 plans allow families to save for college with some tax advantages. The plans are sponsored by states, state agencies, or educational institutions, and can be either a prepaid tuition plan or an education savings plan, depending on what the sponsor offers.

Western Kentucky University campus

A prepaid tuition plan allows you to pay today’s rates for future college education. This can be a tremendous savings if you’re 100 percent certain your kid is absolutely going to a specific college (or going to college at all). These are typically state-owned colleges and universities, and you can only pre-pay tuition, not room and board. Kentucky’s prepaid tuition plan is closed, and will be reassessed annually, the plan says on its web site; Kentucky Education Savings Plan Trust does still offer a 529 plan that allows for college savings, and you can find more on that here.

An education savings plan is simply a vehicle for saving up for future college costs, and that includes room and board. These funds can also be used for private school tuition at elementary, middle and high schools, up to $10,000 per beneficiary. That $10,000 cap, though, doesn’t apply to college – just to K-12 education.

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By Nathan Vinson, Partner

English, Lucas, Priest and Owsley, LLP

If you aren’t paying Kentucky sales tax on items you buy online, you will be soon – and you have the great state of South Dakota to thank for it.

By Nathan Vinson, Partner

English, Lucas, Priest and Owsley LLP

Tax law changes in 2018 were huge at both the state and national level. For this blog post, we’re parsing through the changes to the law that require sales tax to be collected on some services and “luxuries,” which was not required in the past.

By Nathan Vinson, Attorney and Partner
English, Lucas, Priest and Owsley, LLP

estate planWe’ve had lots and lots of questions about the new tax law passed by Congress and signed into law by President Donald Trump in late 2017. It is a large, complicated and sweeping bill that the average person may have some trouble deciphering, which is understandable. We wanted to tackle here what we see as one of the major benefits for those planning their estates: doubling the exemption for estate taxes.

If you’re looking to a solid guide to all of the tax law changes, read The Motley Fool’s take on it here.

In 2011, this base was set at $5 million, and it was indexed for inflation, meaning that you could leave up to $5 million (plus the adjustment for inflation) to your heirs and your estate would pay no estate tax. For tax year 2017, that amount was $5.49 million once adjusted for inflation.

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tax booksEach year, the Treasury Department examines the cost of living in the U.S. and adjusts limitations for retirement plans and many other similar items that affect taxpayers throughout the U.S. As has happened previously, the Treasury raised the limits for contributions to pensions and other retirement plans such as 401(k)s, 403(b)s and most 457 plans.  All of this helps today’s workers save for retirement with pre-tax dollars, which is a tremendous benefit.

Our tax code requires the Secretary of the Treasury to make this adjustment.

The biggest news is that the contribution limit to employer-sponsored retirement plans, such as the above-mentioned 401(k)s, etc., has gone from $18,000 for calendar 2017 to $18,500 for calendar 2018. If you were bumping up against this limit in 2017, you can now adjust and put in just a little bit more, which is always good news.

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By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

Improvements to tax law and reducing taxes are a very popular item on most politicians’ platforms. You won’t find anyone who openly says people should pay more. At least, not anyone currently serving in office.

They’re right, by the way – our tax code is far too cumbersome and it changes constantly. (And no, I’m not running for office.)

President Trump has indicated he wants to reform the tax code and change the way people pay taxes. Lawmakers are reportedly discussing how to do that while paying for expensive new initiatives. How can you do it all?

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